Economics LAP 4 Beyond US Global Trade

Objectives Explain why global trade is needed. Describe issues in global trade.

Explain why global trade is needed.

Producers and buyers should benefit from global trade.Producers and buyers should benefit from global trade. Will you?Will you?

Types of Trade Domestic  Producers and buyers are in the same country Global  Product is purchased in one country and consumed in another

Global Trade ImportsImports  Products bought from producers in other countries ExportsExports  Products that businesses sell to other countries

Why Trade Globally? Countries trade globally because they:Countries trade globally because they:  Have different resources  Need resources that they do not have

Types of Trade Advantages Absolute advantageAbsolute advantage  A nation can produce a good or service at a lower cost than another country Comparative advantage Comparative advantage  A nation specializes in and produces the goods and services at which it is relatively most efficient

Better variety and quantity of productsBetter variety and quantity of products Improved standard of living in both countriesImproved standard of living in both countries Benefits of Global Trade

Access to and availability of scarce resourcesAccess to and availability of scarce resources Benefits of Global Trade Lower prices due to increased competitionLower prices due to increased competition

Exchange of ideas and technology among countriesExchange of ideas and technology among countries Benefits of Global Trade Enhanced relationshipsEnhanced relationships Increased income for shipping and airline industriesIncreased income for shipping and airline industries

Describe issues in global trade.

Factors Affecting Global Trade Technology A nation’s bank account Competition Strength of currency Government control and support

Trade Barriers Tariffs Quotas Subsidies Licenses Product standards

European Union (EU)European Union (EU) World Trade Organization (WTO)World Trade Organization (WTO) North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) Support for Global Trade

Trade centersTrade centers Trade missionsTrade missions Trade talksTrade talks Support for Global Trade

What is produced in your community? Which products are (or could be) exported?

Chinese supplier’s employees  72-hour work weeks  Less than $2 per hour  Dangerous work conditions

Ensure fair treatment and raise product prices? Let supplier take care of employees if products are good quality?

Acknowledgments Original Developers: Christopher C. Burke, April Miller, MBAResearch Version 2.0 Copyright © 2012 MBA Research and Curriculum Center

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